Walker v. Keith
Walker v. Keith
FACTS: Appellants, the lessors, leased a small lot to appellee, the lessee. The lessee was given an option to extend the lease for an additional 10-year term, under the same terms and conditions except as to rental. The renewal option states that the rental will be fixed in such amount as shall actually be agreed upon by the lessors and the lessee…(see quote pg.124).
On the face of the rent provision, the parties had not agreed upon a rent figure. They left the amount to future determination. If they had agreed upon a specific method of making the determination, such as by computation, the application of a formula, or the decision of an arbitrator, they could be said to have agreed upon whatever rent figure emerged from utilization of the method. This was not done.
ISSUE: Whether the quoted provision (pg. 124) is so indefinite and uncertain that the parties cannot be held to have agreed upon this essential rental term of the lease.
RULE: The court found that the basic principle of contract law that required substantial certainty as to the material terms upon which the minds of the parties had met was a sound one and was to be adhered to. A renewal option stood on the same footing as any other contract right. Rent was a material term of a lease. The court held that if the parties did not fix it with reasonable certainty, it was not the business of courts to do so.
It is a necessary requirement in the nature of things that an agreement in order to be binding must be sufficiently definite to enable a court to give it an exact meaning.
ANALYSIS: The term “reasonable rent” is indefinite and uncertain. The lease purports to fix the rent at such an amount as shall “actually be agreed upon.” It should be obvious that an agreement to agree cannot constitute a binding contract. The renewal provision of the parties’ contract was fatally defective in failing to specify either an agreed rental or an agreed method by which it could be fixed with certainty. Because of the lack of agreement, the lessee’s option right was illusory, and the chancellor erred in undertaking to enforce it.
The amount of rent agreed upon is at the essence of a lease contract. What the law requires is an adequate key to a mutual agreement. This very case is living proof of the difficulties encountered when a court undertakes to supply a missing essential term of a contract.
CONCLUSION: The basic principle of contract law that requires substantial certainty as to the material terms upon which the minds of the parties have met is a sound one and should be adhered to. A renewal option stands on the same footing as any other contract right. Rent is a material term of a lease. If the parties do not fix it with reasonable certainty, it is not the business of courts to do so. The renewal provision before us was fatally defective in failing to specify either an agreed rental or an agreed method by which it could be fixed with certainty. Because of the lack of agreement, the lessee’s option right was illusory. The Chancellor erred in undertaking to enforce it.